It was granted court protection from creditors in February 2009 after rising oil prices and slowing demand due to the global crisis hit SUV sales. Former Chinese parent Shanghai Automotive Industry Corp declined to inject more funds.

Ssangyong has struggled to stay afloat since a violent strike over job cuts disrupted production for almost 80 days last year.

If the deal goes through, Mahindra would become the second Indian carmaker to enter the South Korean market after Tata Motors, which bought truckmaker Daewoo Commercial Vehicle in 2004.